I received an email today from a trader it was interesting in describing why not to trade yesterday.
He does not exactly mention EUR/USD but they are all impacted by each other as he says in previous emails.
I think this is a very good read even though it is a little long.
He does not exactly mention EUR/USD but they are all impacted by each other as he says in previous emails.
I think this is a very good read even though it is a little long.
QuoteDislikedHi (removed name)
Oil prices Friday closed above the $70 per barrel mark for the
first time in 10 months. This was attributed to widespread concern
over rising demand during the summer driving season. This is a
scene played over and over from year to year petrol demand in the
U.S. rises along with prices.
What impact do rising prices have on the Forex market though? Well
more likely than not the prices will impact CAD and JPY like
discussed in my previous email. For those who have not read it yet I simply
explains that rising petrol prices make the CAD Dollar strengthen
and the JPY Weaken.
Knowing this information it would have been a good idea to Long
CAD/JPY and GBP/JPY as the market opened on Monday. However
something else happened that has had a direct impact on the Forex
markets. Unless you have been living under a rock you will have
probably heard that terrorist planned to detonate two car bombs in
London and they drove a flaming car into an Airport in Glasgow.
When something like that happens traders get nervous, if terrorists
want to cripple a country all they need to do is attack the oil
supplies. Without oil America will come to a halt and investors
know this so whenever investors hear the terrorist warning bell
rung they become extremely cautious.
So on Friday petrol prices closed above $70 I was excited I thought
come Monday they will move further up. I already had a short on
USD/CAD as per my system but I was planning on opening a long
GBP/JPY a long CAD/JPY and a long USD/JPY. Then on Saturday
morning I woke up to news about terrorists and I knew those trade
would not be happening. If you read my last email you would know I
preach trader discretion, I expect you to use your brain instead of
blindly following indicators. A situation like this is when a
trader's discretion is needed.
1) We have crude oil prices go through the roof so if an indicator
is telling us to go long on USD/CAD we know that indicator is
probably wrong. We know that the price of oil is correlated with
the CAD so we close our eyes to the indicators and long the CAD.
2) We hear of an attempted terrorist attack in London, we know that
this may slow the rise in crude oil prices down to a crawl. This
means that it would not be an ideal time to go long on the Canadian
dollar.
Theses two facts contradict each other 1 -1 = 0 so to me it means
NO TRADING. That is when my discretion comes in handy at a time
like this nobody knows what is going to happen and the markets go a
little crazy. I am sure a lot of you traded yesterday some of you
may have got lucky and made money and you are reading this thinking
I am wrong. If you are one of those people I need to tell you that
it was luck because yesterdays erratic moves made some traders rich
and made others poor.
Smart traders would stay out and watch everybody else lose money.
Personally I went and shot a few holes of Golf while keeping an eye
on the market throughout the day. Today I will be doing the same
thing, if things calm down today I will trade again tomorrow.
I hope this email helped. I will be sending another email tomorrow
with my thoughts on this coming NFP report.
Regards, Christian
